10 November 2021 10:00

The Chief Executive Officer’s point of view on the first nine months of 2021

Dear Shareholders,

the most recent months of this difficult 2021 were characterized by two important events, both of which are destined to have very positive repercussions for our accounts and our prospects going forward.

On the one hand, we signed the agreement to sell a portfolio of hypermarkets and supermarkets to ICG  – Intermediate Capital Group (Alternative Asset Manager active in three continents), for €140 million, consistent with the book value at 30 June 2021.

On the other hand, for the first time in the current year we saw clear signs of a shift in the operating conditions. The sales of mall retailers were up 15.6% network wide compared to the first nine months of 2020, while footfalls rose 5%. Looking at September stand-alone, not only are sales up 3.9% against September 2020, but they are very close to the levels seen in September 2019, before the pandemic. The change in direction began on 17 May when the last restrictions were lifted and shopping centers were allowed to stay open on weekends, as well.

While the anti-Covid restrictions still had a negative one-off impact of €6.9 million on our income statement at 30 September 2020, it was lower than the €8.1 million reported in the same period of the prior year.

Even though footfalls are still 5.2% lower than in September 2020, the retailers were still able to increase sales thanks to an increase in the average ticket: testimony to the fact that, while shoppers go to the centers less frequently than before the pandemic, the shopping is more targeted.

While the most recent figures on footfalls are encouraging, we want to have a proactive approach in this regard. Our intent is, in fact, to interpret the new consumer trends correctly and put our assets in the condition to be appealing including with respect to the emerging trends, in order to continue stimulating traffic.

For this reason, the lease management and reletting activities continued at a robust pace, while we continued to study new layouts and retail concepts including thanks to the Next Steps project which has already produced results by quickly creating outdoor spaces for restaurants.

The new cycle of negotiations carried out with tenants was focused on providing temporary reductions in rent and deferred payments only to the businesses affected by the restrictions in order to find a sustainable balance for both parties. In the almost 200 new leases signed with the retailers in Italian malls, the decrease in rents was very limited at around 1.2%. The fact that we have cultivated these relationships also allowed us to bring rent collection for our Italian portfolio to 86% at the end of October.

Il livello di financial occupancy del 95,4% che abbiamo raggiunto in Italia al 30 settembre 2021 è un’ulteriore eloquente dimostrazione di come questo sforzo sia stato portato avanti con successo, nonostante i benefici sui ricavi di avere riallocato spazi rimasti sfitti a causa della pandemia non siano immediatamente tangibili, essendo distribuiti sui prossimi mesi.

The financial occupancy of 95.4% that we achieved in Italy at 30 September 2021 is further demonstration as to how the work done was done successfully, even though the revenues will not benefit immediately from the reletting of the spaces left vacant as a result of the pandemic as the positive effects will be spread out across the coming months.

In the first nine months of 2021 we reported net rental income of €86.9 million and succeeded in limiting the drop against the first nine months of 2020 to €2.8 million. As mentioned before, we estimate that the impact of the one-off measures implemented in response to the anti-Covid restrictions – mainly rent reductions – was €1.2 million lower than in the first nine months of 2020. We did, however, record a decrease of €3.1 million in rental income before the rent reductions due mainly to the lower revenues posted by the Italian malls, as well as a €0.9 million increase in provisions and condominium fees explained by vacancies. The food anchors found in all the shopping centers, which reported an increase in revenues of 0.3% compared to the first nine months of 2020, provided important support.

Looking at FFO, the €48.4 million achieved in the first nine months of 2021 reflects a decrease of €3.2 million in core business EBITDA, as well as a drop of €2.1 million in financial charges. Overall, FFO fell roughly €5 million or 9.3% in the first nine months of 2021.

As for financial charges, the sale of the portfolio of hypermarkets and supermarkets had a positive impact, as seen by the considerable decrease in the Loan-to-Value which went from 48.3% at the end of September 2021, to 45.6% pro-forma after the disposal. Based on the agreement with ICG, IGD will receive net proceeds of €115 million[1], which along with available liquidity will make it possible to cover almost all the 2022 maturities and calmy begin work on the refinancing of the subsequent maturities.

In light of the results achieved in the first nine months of 2021 and the indications we are seeing in terms of consumption, we confirm that in 2021 we expect to see an increase in FFO of between 7 and 8%, also because in the last quarter of 2020 additional direct costs related to Covid-19 of approximately €10.4 million were incurred which, to date, are not foreseen. The underlying assumption is, obviously, that the businesses inside our shopping centers will not be subject to any new restrictions.

Based on the scenario that is materializing, we also believe that in 2022 it will be possible to resume payment of a dividend for 2021.

Mid-December the new Board of Directors, appointed by shareholders during the Shareholders’ Meeting held on 15 April, will also approve the Business Plan 2022-2024 which lays out IGD’s new path through the market environment that lies ahead for retail real estate players. The scenario that is emerging in this post-pandemic period is positive, including thanks to the reforms that the Italian government intends to implement which will allow for an efficient distribution of the NRRP funds, fueling healthy growth.

In this scenario, we are in a position to leverage on a favorable propensity to buy. In the past months we have already demonstrated that the regional roots and the medium size format of our shopping centers, along with the good resilience shown in the periods when the anti-Covid restrictions were in place, are now helping us in this recovery phase to understand and react more quickly to changing consumer trends.

We hope, therefore, that over the next three years will be able to, once again, deliver the results we achieved before the pandemic and to provide our shareholders with compelling returns as the progress we make in terms of economic-financial results becomes visible.


Claudio Albertini

IGD’s Chief Executive Officer


[1] If the loan is for 55% the value of the assets.